BankDirect cuts earnings rates for mileage checking accounts as of June 1, 2013

One of the very best ways to accrue miles for a checking account has been with BankDirect. They offer 100 miles per month per $1,000 you keep with them, up to $200,000. So this basically means $1,000 deposited with them accrues 1,200 AAdvantage miles per year. I value AAdvantage miles at 1.8 cents each, so that’s a return of 2.16% tax fee (making it closer to 3% for many people). For a balance in a checking account that was completely flexible, that’s an amazing return, in my opinion. Basically, a balance of $200,000 would get you 240,000 AAdvantage miles per year. That’s more than enough for two business class tickets to Asia.

Back in November of 2011 they added a $12 monthly service fee to accounts, and even with that it was still a great program. Unfortunately they’ve announced a huge change which kicks in on June 1, 2013, and greatly cuts the earnings rates for balances of over $50,000.

Starting on June 1, the first $50,000 deposited will continue to earn 100 miles per $1,000 deposited with them, though above that you’ll only earn 25 AAdvantage miles per $1,000. So while a $50,000 balance will continue to accrue 60,000 AAdvantage miles (with $144 in annual fees), a balance of $200,000 will now only accrue a total of 105,000 AAdvantage miles.

So this definitely sucks, though I can’t really say I’m surprised. Despite the 75% incremental reduction in earnings for larger deposits, you’re still probably better off keeping “liquid” cash in a BankDirect checking account earning some miles, given the lack of alternatives.

Comments

  1. The better the deal, the more disappointing it is when it disappears, and (of course) the more likely it will disappear!

    I still think it is worth it, if you’d otherwise keep 50k liquid in a deposit account earning (at most these days) 1% before taxes. Works out to about $400-500 for 60k AA miles depending on your tax bracket.

    Shame this doesn’t scale as well as it used to, but I’m glad it is still a good deal in an incredibly difficult environment for returns on liquid deposit accounts such as this one!

  2. “So this basically means $1,000 deposited with them accrues 1,200 AAdvantage miles per month.” Should be per year.

  3. HORRIBLE! But not shocked. I’ve been earning 20k miles a month doing absolutely nothing.

    It actually makes more sense to hold $50k in a MM, and another $50k in a checking, instead of a single account with over $50k in it.

    definitely time to evaluate options…

  4. where else can you run to? change fees raised, hotel/air redemption devalued, cc signup bonus cut, 2-browser trick dead, now this. the golden era of america is gone.

  5. Ben, do you by chance still have any referral links left? If not, any recommendations on where to find one (rising tide floats all ships)?

  6. Im have always been skeptical about putting money in here. I mean is this a legit bank.??? Any referal links though??

  7. @Nick I had the same question when I was thinking of opening an account 2 years ago. They are the Internet version of Texas Capital Bank, which is a real brick and mortar bank. I even checked with the Fed to make sure they are FDIC insured. They are, both the checking account and the money market account.

    I too am really sad about this, since we were getting virtually enough miles every year for 2 AA FC T/A tix, just by having fully liquid funds sitting there. After the HHonors devaluation, I was really depressed to learn of this.

    But it’s actually not as bad as the HHonors changes. For those with $200K to deposit, note that you can leave $50K in the checking account, and move $50K to their money market account which pays 50 miles per $1000K, and still get an average of 75 miles per $1000 for the two. That’s 90K AA miles per year. Sadly, only one account per household though.

    Then take the other $100K and open a Fidelity brokerage account. Bonus of 50K AA or 50K United miles if you keep the full $100K amount there for 6 months, whether you do any trades or not. You can only do this once a year, but after 6 months you can take that $100K from your account and put it in an account for a significant other for another 50K miles. Rinse and repeat, until this deal too gets gutted. 🙁

  8. @Rick Ingersoll

    do you have a post about Fidelity? is it a checking account as well? i didn’t even know they had those. can you please direct me where to read about it?

    thank you.

  9. Thanks Ben and to the other commenters for this informative post. Does opening the Fidelity brokerage account result in a credit pull and if so soft or hard?

  10. @ Claire — It definitely doesn’t count as a hard pull. Maybe a soft pull, though I don’t think any pull at all.

  11. $50,000 left with them costs $144 in annual fees plus foregone interest which is $425 with Amex savings or Ally bank account (.085% interest). So for 60,000 AAmiles you are paying $569. Not a real good deal in my mind. They have definitely devalued this and i will put my $200k back in an interest bearing account at .085% (generating $1700).

  12. There are no fees for the money market account, so $50K in checking and 50K in the mm act, “costs” @$1k in fees and missed interest as Buck points out. Of course that interest is taxable, and the miles are not. If you are in a high Fed tax bracket, and live in a state with a high state income tax, that puts a large hole in that interest payment.

    So for a pre-tax $1K you get 90K AA miles, which is nearly enough for a R/T T/A Business class Saver ticket. Just over .011 per mile. I think if AA announced a sale at that price, most bloggers would be telling us what a great deal that is. But only for the first 100K.

    However, keeping 200K in checking for only 105K miles doesn’t seem worth it at all. Since 50K plus 50K with BD, and 100K with Fidelity for 6 months, and then the same 100K in Fidelity with a significant other’s account for the next six months gets a total of 190K miles.

  13. I maxed out the miles checking at Bankdirect for the last few years given no other decent yield alternative for cash. But I now pulled out all but 50k after this change. I wonder if everyone will. It’s a strange move by Bankdirect if they want to increase their assets.

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